The lack of a true resolution beyond 1024x768 (It just scales up beyond that resolution) makes the game look even uglier and blurrier on an LCD screen
The 'ugliness' you are seeing is coming from the jaggies, that sadly won't disappear even if you set the resolution to max.
Once we get AA and 'true' resolution options with the next patch (here's hoping :hmm

the game will look much better for you!